Easing PSU stake sale to duty correction: Pointers for Budget

It also stressed the need to take concrete steps focused on strategic self-reliance and global integration.

Among the Survey’s suggestions is that the government can look at amending the definition of a ‘government company’ under the Companies Act to allow it to reduce its minimum stake in listed central PSUs to 26% from 51% currently. The rationale, as per the Survey, is that effective control of a company requires only about 26% share, and the 51% minimum shareholding requirement is limiting the potential for further disinvestment in around 30% of listed Central PSUs where government stake is already under 60%.

“Since effective control requires only about a 26% stake, the government could consider amending the definition of ‘government company’ under the Companies Act, limited to listed entities, to allow them to remain as government companies with a minimum of 26% ownership, thereby retaining special resolution rights, while enabling the government to monetise its stake,” the Survey said.

“Alternatively, if the objective is eventual privatisation, the government could continue phased OFS (offer for sale) below 51% and even towards full exit, without changing the legal definition of ‘government company’. This would enable CPSEs (Central Public Sector Enterprises) to function post-disinvestment as professionally managed entities with dispersed ownership, clear governance standards, and transparent succession frameworks,” it said.

Emphasising that recent geopolitical realignments and global supply-chain restructuring can lead to opportunities for labour-abundant economies to position themselves as competitive assembly and manufacturing hubs in GVCs, the Survey called for a “renewed and sustained focus on input tariff neutrality”.

It cautioned that higher import tariffs on intermediates and capital goods relative to final products can result in inverted duty structures, which raise input costs for domestic manufacturers and discourage assembly and component manufacturing. It acknowledged that correction of inverted duty structures has been initiated in recent Budgets, particularly for various core manufacturing sectors, which has contributed to a more neutral tariff environment.

“Going forward, continued calibration of tariffs on intermediates and capital goods — especially in high-growth sectors — can enhance cost competitiveness, deepen assembly and component ecosystems, and support India’s emergence as a preferred global production base,” the Survey said.

In addition to correcting inverted duty structures, the Survey also recommended that measures be taken to improve logistics infrastructure, lower logistics costs, and reduce regulatory expenses — all as part of a unified effort to reduce manufacturing costs and enhance India’s export competitiveness.

On QCOs, the Survey said that their design and implementation should be grounded in economic practicality as instruments for strengthening quality assurance, consumer safety and strategic resilience. “If regulations are applied without comprehensive value-chain analysis, it can trigger cascading consequences, increasing costs and erode cost competitiveness,” the Survey said.

Citing political stability and strong macroeconomic fundamentals as important FDI drivers, the Survey said India excels in this area but could better leverage its strengths, as inflows are below potential, particularly for infrastructure needs, despite clear government intent and proven economic management.

It said that India needs a targeted strategy that identifies a specific set of GVC anchors and establishes a state apparatus that collaborates directly with them as partners. “The direct engagement will help resolve cross-agency issues and provide customised and time-bound solutions. Additionally, it is crucial for India not only to offer compelling incentives but also to ensure these incentives are reliably implemented,” it said.

The Survey suggested creation of a task force to engage top global companies and promote India’s advantages — “stability, macroeconomic strength, sustained growth and market size” — in order to boost FDI. It added that efforts to improve the investment environment by simplifying processes and procedures will need to be kept up. “As foreign investors prioritise predictability and sustainability in policies, every policy change in the country must pass the necessity test to meet both these parameters,” the Survey said.

To finance sustained growth, India must strengthen long-term capital markets, the Survey said, but noted that India’s corporate bond markets remain shallow and illiquid, and are dominated by top-rated issuers. “Securitisation is limited, municipal bonds are underdeveloped, and pension and insurance funds remain conservative investors due to regulatory and cultural inertia,” it said.

It recommended that a “coordinated agenda” could address these barriers by rationalising tax treatment of debt instruments, creating credit enhancement facilities for lower-rated issuers, and standardising securitisation structures and disclosures. Recommended reforms also included building municipal financial capacity and pooled bond mechanisms, revising investment guidelines for long-term funds, strengthening financial market infrastructure and insolvency systems.

“Such reforms would supply the scale and maturity needed for infrastructure and climate financing while lowering the economy’s cost of capital,” the Survey said.